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The authors are grateful to Philippe Solal, the editor Myrna Wooders, an anonymous associate editor, and especially an anonymous reviewer for very detailed and helpful comments to a previous draft. Special thanks are due to Peter Holch Knudsen and Mich Tvede for valuable input at the early stages of this work. Of course, all deficiencies remain the responsibility of the authors.

Abstract

A group of players in a cooperative game are partners (e.g., as in the form of a union or a joint ownership) if the prospects for cooperation are restricted such that cooperation with players outside the partnership requires the accept of all the partners. The formation of such partnerships through binding agreements may change the game implying that players could have incentives to manipulate a game by forming or dissolving partnerships. The present paper seeks to explore the existence of allocation rules that are immune to this type of manipulation. An allocation rule that distributes the worth of the grand coalition among players is called partnership formation-proof if it ensures that it is never jointly profitable for any group of players to form a partnership and partnership dissolution-proof if no group can ever profit from dissolving a partnership. The paper provides results on the existence of such allocation rules for general classes of games as well as more specific results concerning well-known allocation rules.